Finance makes strange bedfellows.
Take the case of debis Affinity Services Division of DaimlerChrysler Financial Services North America.
It is nothing new for an automaker's financial services company to expand outside its parent company's needs. But it is quite another matter when that new business belongs to the company's rival. In the case of debis, that rival is Nissan North America's Infiniti Division.
So while a sales war boils between Mercedes-Benz and Infiniti, debis is handling the financial services needs of both companies.
In fact, debis is making Infiniti more competitive.
Last fiscal year, Nissan North America and its captive finance company, Nissan Motor Acceptance Corp., suffered $376.7 million in writedowns, a result of having a lease portfolio that was highly subvented to generate artificially high U.S. sales volumes.
More losses are expected for the next few years, and Nissan already has set aside another $300 million to absorb some of the shock of future leases coming back. What is more, Nissan Motor's debt rating has swooned to junk status, giving its finance arms less room to maneuver in the global capital markets.
As a result, Nissan Motor Acceptance Corp. is hardly the financial presence it once was, and it has all but gotten out of the subvented leasing business. But with market pressures being what they are, sometimes Infiniti requires incentives to move the metal.
'Nissan can't be aggressive because they have capital restraints and a high debt level. That debt level makes them not very competitive. But they do need financing alternatives,' said Brian Reed, managing director for debis Affinity Services Division, which is based in the Dallas-Fort Worth area.
Reed does not see a problem helping a rival of the parent company.
'If we don't do it, someone else will. Doing this gives good returns to DaimlerChrysler, which makes it good for everyone,' Reed said.
Debis is handling subvented lease and nonsubvented retail programs for Infiniti in the central and western regions. Chase Auto Financial Services handles Infiniti on the East Coast. In turn, Infiniti buys down lease subvention points with debis but does not have to take the car back at the end of the lease, noted Tom Orbe, Infiniti general manager.
'We use our buying power with these finance sources to provide our dealers some alternatives, at more lucrative terms than they might get on their own,' Orbe said.
'Also, if we used NMAC, all those cars would be returned back to us. In the past, we had way too many cars coming back at once, and our channels could not dispose of them the way we wanted to,' Orbe said.
Orbe said he sees it as a trade-off: Infiniti could gamble on the residual value and deal with the car coming back off-lease, or it could pay debis for a couple of residual points to subvent the lease and have it take care of the vehicle coming back.
Although Infiniti accounts for less than 5 percent of debis' total portfolio, that amount is growing. In February, debis booked $15 million in Infiniti loans, representing 20 percent of debis' February business, Reed said.
Debis was formed 21/2 years ago as a pseudo-independent financial services company, one that nonetheless belonged to then-parent Daimler-Benz. In the time since, in addition to the Infiniti business, debis also has taken on about one-third of the financial services business for Daewoo Motor America, as well as financing for about 650 dealers nationwide.
'The best way to leverage your returns is to diversify,' said Reed. 'If you're limited by the sales of your manufacturer, the opportunities lie outside.'
Mark Rechtin is a staff reporter for Automotive News based in Los Angeles.